Some tips for long-term investors

Property manager Michael Patnik provides some tips for long-term investors on his blog. Most important: “Stick to the plan”.

There are a few things that are essential for a successful long-term investor. First, it is important to draw up a plan that will serve as an anchor and starting point. Second, it makes sense to write down the reasons for the big changes in the portfolio. Mistakes can be prevented or – if mistakes happen – it can be a lesson for the future.

These are the first two tips that Michael Patnik gives on his blog Irrelevant investor⁇

Do not panic

It is important to never panic and realize that people are working to pay their daily bills, but that there is an investment in paying bills in the future.

For a long-term investor, it’s not a few weeks or months, but usually years, depending on a person’s age and what the plans for invested capital are.

Act as little as possible

The more fixed rule is to keep the number of transactions to a minimum. Patnik sets an example when stocks and bonds moved in all directions last week. In equilibrium, however, almost nothing happened to the S&P 500. Bonds continued to fall, but does that mean now is a good time to sell?

Batnick is not sure, but historically the opposite is true because long-term returns are guaranteed for both stocks and securities. Changing the portfolio based on short-term fluctuations is always a bad idea.

Helicopter display

Patnik’s advice is to magnify. He points to revenue and dividend trends in the United States over the past 100 years. There are fluctuations, but in the long run the average return on a stock is 6% per annum and the dividend increase is 5%.

The total return on the stock ranged from 8% to 10% per annum. It has been high for the last ten years, but do not expect it to remain the same.

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Diversification

Finally, diversification is an absolute necessity. The easiest way to do this is with index funds or ETFs, but individual stocks or actively managed mutual funds are also possible. It is only a matter of time before a large and wide enough pool of stocks and / or funds is put together.

Very few stocks or securities are risky because everyone knows that there are stocks that have had little or no return for many years in a row, and there are some. It is almost impossible to predict exactly who will be tomorrow’s winners and who will fail.